The NSW Empowering Homes program has highlighted a few trouble spots in the solar storage market, writes Arianwyn Lowe.
Australia is a world leader in the uptake of rooftop solar and at the forefront of integrating PV, and other clean energy technologies, into the energy system. Recognising the importance of distributed energy resources and the value they could provide in the energy system of the future, the NSW Government has set ambitious targets for driving uptake in home energy storage technologies. This has involved testing a new approach that enables residents of NSW to access the benefits of home solar battery systems.
It’s clear the home battery and green consumer loan sectors are rapidly emerging and evolving spaces and our experience has provided valuable insights to inform the future role and direction of government in terms of how best to support these sectors.
Finance flows, prices stagnate
Buy now pay later-style consumer loans are now deemed appropriate by the Australian Competition and Consumer Commission for purchase of solar battery systems. This, coupled with the low-interest environment that persists in Australia, has resulted in more low- and no-interest consumer finance products being available for households wanting to install solar battery systems.
Forecasts anticipated a material drop in the purchase price of systems by this time – but it hasn’t happened. While many more products have entered the Australian market, arguably increasing consumer confusion and inducing choice paralysis rather than improving outcomes, system prices have remained stubbornly stagnant – with some popular brands actually increasing in price.
It is thought this is partly due to the rising demand for electric vehicles worldwide, and the impact of this demand on the availability of raw materials (such as lithium) and manufacturing capacities for home batteries.
Questions over compliance
As with any relatively new technology, there is a wide variety of players entering and operating in this space. They range from existing large and small solar retailers retrofitting battery offerings to existing solar packages, to newer technology vendors partnering with electricity retailers to offer full energy management packages or mobile phone-like subscription model solutions.
Across all types of providers, audits of installations delivered through government programs have identified high levels of non-compliance with Australian wiring, solar installation and battery installation standards (AS/NZS 3000, 5033 and 5139 respectively).
While most non-compliances identified are relatively minor in terms of any safety risk, some are more concerning. Despite significant media focus on rooftop DC isolators, insufficient protection against water ingress or failure to ensure they are not exposed to direct sunlight are still some of the most frequent non-compliances identified.
To make matters worse, installers are often reluctant to return to a site to rectify identified non-compliances due to the backlog of new installs they have on their books.
The NSW Government is working with industry to improve general understanding and compliance with the standards and to ensure customers are getting what they paid for.
Protracted rectification works completed many months after the system was initially installed (if at all) are causing decreased levels of customer satisfaction, distrust and negative perceptions of an industry that has yet to fully mature.
Customers in the shadows
In NSW, customers are encouraged to seek more than one quote from a list of approved solar-battery suppliers that have demonstrated they meet the government’s strict eligibility criteria. Our data highlights some interesting trends in relation to customer behaviour and system costs.
First, home batteries are a relatively new product and customers generally have a low understanding of what one should cost in relation to its kilowatt-hour capacity.
Second, it’s also somewhat complicated to forecast the benefits of such a system. This involves assumptions on the customer’s energy usage practices many years into the future and what will happen to electricity prices and feed-in tariffs over that time horizon.
As a result, there’s a significant information imbalance between the customer and the supplier when determining which system would be most appropriate. Naturally, it’s in the supplier’s best interest to sell the customer a system that provides the supplier with the best return. Customers do have the option to shop around but government data indicates that only about half of customers obtain more than one quote before making their purchase.
Customer feedback suggests complexity and a lack of comparability of quotes from suppliers fuels their reluctance to seek more than one quote. Diverse service offerings such as those tied to longer-term energy management or virtual power plant services also act as a deterrent for them to shop around.
Accordingly, the NSW Government is investing in improved customer communications and independent information customers can use to better support their decision making.
Customer confusion and choice paralysis is compounded by the high levels of variability on quoted system costs by different suppliers across the market. Price variability can be difficult to tease out as some suppliers quote significantly higher costs but then provide a discounted installation cost, or vice versa.
However, data shows that fully installed costs can vary by more than 10% either side of the average price, representing a difference of between $2,000 and $3,000 to the customer.
The NSW Government is exploring ways to encourage the uptake of ongoing energy management and VPP services to address these issues. Provision of these services can improve financial returns for customers and establish a longer-term relationship between the parties. As a result, suppliers are incentivised to provide quality systems at as low a cost as possible to establish and maintain this ongoing service provision relationship.
Overall, surveys of customers participating in government programs have indicated a high level of satisfaction, both with the program itself and the quality of installation.
Our experience to date indicates a need for the solar battery industry to raise the bar with respect to compliance with standards and provide greater clarity to customers regarding relevant offerings. Furthermore, the industry must continue to demonstrate the benefits of a quality, well-sized solar-battery system delivered at a competitive cost.
Arianwyn Lowe is the director of energy programs within the NSW Department of Planning, Industry and Environment.